Ch. 20 Natural Resources and Econ Growth NR ECON EXAM

195 Countries

vary in almost every dimension- economic, social, demographic and political. Diverse in their natural resource endowments in terms of types (quality and quantity of the resources).

Developed Countries

made successful transitions to industrial and post-industrial economies. Slow population growth and relatively high levels of social welfare.

Developing Countries

growth in per capita income and wealth has lagged behind developed countries.

High Income Countries

natural resource make up about 3.3% of total wealth.

Low Income Countries

natural resources make up about 24.8% of total wealth

Concepts of NR management in developing countries

efficiency, incentives, equitable distribution of net benefits, over exploitation of open access resources, importance of property rights, monopolies, and market and gov. failure

Forest Economics

efficient decisions are related to the interest rate and depends on whether there is a reliable financial market in the country.

Fisheries in open access situations

may be not other income available

Oil and Mineral deposits

provide a major impetus for economic growth so many not be harvested optimally in the short run.

Pro-poor economic growth

1. Job creation in sectors with poor people.

2. Access to education, health, and financial services for low income population. (roads, irrigation, markets).

3. Investment in rural infrastructure.

4. Social protection (manage negative shocks).

5. Progressive taxation

Progressive Taxation

targeted subsidies and redistribution of growth benefits

Bangladesh

labor intensive garment industry and microfinance access; growth was labor driven.

Vietnam

Market reforms and investment in rural education helped reduce poverty; inclusive rural development.

Rwanda

Combined strong growth with pro-poor programs in agriculture, health, and land access.

Sustainable Growth

economic growth that meets the needs of the present without sacrificing future generations

Economic Development

steady and inclusive GDP growth, encourages innovation, productivity, and long term generations.

Environmental Sustainability

minimizes depletion of resources, reduced pollution and greenhouse gas emissions, encourages renewable energy.

Social Inclusion

benefits of growth are equally distributed, reduces poverty and inequality, promotes decent work, education, and healthcare for all.

Sustainable Growth Indicators

GDP, CO2 emissions per unit of GDP, renewable energy share, employment to population ratio, inequality, access to basic services.

Resource Curse

many countries with abundant resource stocks have been unable to turn those into economic growth.

Countries Avoiding Resource Curse

have strong institutions (rule of law, accountability, and transparency), long-term fiscal planning, economic diversification (invested in human capital and other sectors), and public benefit focus (used revenues for education, healthcare, and infrastructure, not just for enrichment).

Natural Resource Rents Management Positives

1. Use natural resources in a way to maximize their rents.

2. Channel the rents into productive investments.

Things that will happen with these resource rents

illegal firms (with no incentive for re-investment), foreign companies, finance government expenses, pay off debt to foreign creditors, and put money into a bad investment.

Hard Infrastructure

ports, roads, airports.

Soft infrastructure

education, healthcare, investment in human capital.

resource rent investment in education outcomes

1. lower population growth rate

2. more productive work force

3. Lower future demands on resources

Banking System

need transparency for resource rents to be productive.

Property Rights

an empowerment that establishes the conditions under which a person or group of people may utilize a natural resource. Ownership gives incentive to maintain and improve property, encourages investment, and enables markets.

Management to promote growth

1. Way to limit effort levels: Voluntary cooperation, public regulation, and harvesting quotas.

2. Some means to transform some if not all of the resource rents into investment that will provide employment and incomes to everyone.

Payments for Environmental Services

need to determine the value of environmental service which likely has no market. (paying the mangrove owner not to develop their land)

Incentives and Political Power

high taxes on cash rich crops leads to overuse of resources. (maximizing output)

De Facto

informal or unwritten norms, practices, or expectations that govern behavior. No formal law (nepotism, bribes, local customary land rights)

De Jure

formal, legal laws and regulations enforced by legal systems. Anti-corruption laws, property titles, civil hiring rules.

High Resource Prices

potentially too much investment in the resource.

Low Resource Price

Incentive for Underinvestment